Private Equity Firms Weighed $100 Billion-Plus Buyout of Microsoft’s Xbox

A group of private equity firms in recent months considered a potential buyout of Microsoft’s Xbox gaming unit that could have valued it between $100 billion and $150 billion, according to people familiar with the discussions.

The short-lived discussions by the private firms were exploratory and didn’t turn into a negotiation with Microsoft, the people said. But they show the company could find buyers if its turnaround of the struggling gaming division falters. The identities of the PE firms couldn’t be confirmed.

A Microsoft spokesperson said in a statement that “Xbox is not for sale,” and declined to comment further.

Based on the unit’s revenue, the high end of the price those firms considered would have been roughly in line with the recent leveraged buyout of another gaming giant, Electronic Arts.

The private equity firms’ interest happened around the time The Information reported in June that Microsoft had considered spinning out or restructuring the Xbox unit as a wholly owned subsidiary, which could make it easier to sell. Microsoft had also considered creating a joint venture with other partners. Since then, Xbox management under CEO Asha Sharma has focused on improving the unit’s operations and accelerating growth.

The Xbox unit includes Activision Blizzard, a gaming publisher Microsoft acquired for $75 billion in 2023. The business, which employs about 14,000, has suffered in recent years from razor-thin profit margins and declining sales, as its bet on acquiring a large number of studios didn’t generate as much new revenue as it had hoped.

Xbox’s revenue fell 7% for the fiscal year ending in June, to $21.8 billion. Its accountability margin, which is similar to an adjusted profit margin, has fallen over the past year to just 3% as of June, the company disclosed earlier this year.

Since taking over the unit this February, Sharma has tried to turn the business around. In July, she laid out a plan to cut 3,200 jobs, or around 20% of its staff, over the next year and invest more in franchises such as Halo and Minecraft, The Information has reported.

Still, the unit is a relatively small part of Microsoft, about 7% of its total revenue, and the company is pouring capital into data centers and other AI investments, hurting its free cash flow.

Few buyers would be able to raise $100 billion or more for a takeover of Xbox, making it more likely that any deal would involve several firms.

A deal involving Xbox, if it ever materialized, would dwarf the largest leveraged buyout in history: Earlier this year, Silver Lake, the Saudi Arabia Public Investment Fund and Jared Kushner’s Affinity Partners took Electronic Arts private in a leveraged buyout that valued the gaming company at $55 billion, including debt. That was about seven times Electronics Arts’ annual revenue of around $7.5 billion in the 12 months ending in March, though unlike Xbox, Electronic Arts doesn’t have a hardware business weighing on its margins.

While the games industry grew rapidly during Covid-19, it has since come under pressure as sales have stalled and the AI boom has driven up the price of the hardware needed to manufacture consoles. In one sign of rising costs, Xbox recently internally projected that a console set to ship in 2028 could cost consumers $1,200 to $1,800, Fortune reported Tuesday.

The Xbox console business competes with Sony-owned PlayStation and Nintendo. Sony’s game and network services division, which operates PlayStation, reported around $29.8 billion in revenue in fiscal year 2025, roughly flat from the year prior, though sales of its console and games it develops fell.